What’s On

WPP records 1.5% revenue growth in Q1 2014

Following the Group’s ‘record year’ in 2013, 2014 has started stronger and similar to the final quarter of 2013, says the Q1 2014 earnings statement from WPP that shows a good start to 2014. Impacted by the rise in the UK currency, the revenue reported is at GBP 2.570 billion. In USD, WPP’s Q1 revenue was up by 8.7 per cent to USD 4.257 billion.

The first quarter of 2014 shows all geographies and sectors growing revenues on both a constant currency and like-for-like basis. Like-for-like gross margin or net sales was up 3.8 per cent compared with 1.9 per cent in the same quarter last year and 4.3 per cent in the fourth quarter of last year, which together with quarter three were the strongest quarters of last year.

WPP states that the pattern for 2014 “looks very similar to 2013, perhaps with slightly increased marketer confidence” enhanced by stronger global GDP growth forecasts and the mini quadrennial events of the Winter Olympics at Sochi, the FIFA World Cup in Brazil and the midterm Congressional Elections in the United States.

Behind the 1.5 per cent revenue growth
The 1.5 per cent growth in revenue includes like-for-like growth of 7.0 per cent. A 2.6 per cent growth has come from acquisitions and 8.1 per cent from currency. The number reflects the continuing strength of Sterling against many currencies, particularly in the faster growth markets, as in the final quarter of 2013. Quarter one of 2014 showed a similar pattern to the final quarter of 2013, with particularly strong growth in North America and the United Kingdom. Sector wise, apart from advertising and media investment management, the sub-sector direct, digital and interactive has shown consistent growth.

The group gained a total of GBP 797 million (USD 1.275 billion) in net new business wins in the first quarter, compared to GBP 940 million (USD 1.504 billion) in the same period last year.

In line with its strategic focus on new markets, new media and data investment management, WPP completed 20 transactions in the first quarter; 13 acquisitions and investments were in new markets and 16 in quantitative and digital (of which 14 were also in new media and two in data investment management including data analytics and the application of technology), with nine of these in new markets and quantitative and digital.

APAC performance
In Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, net sales growth in the final quarter of 2013 improved over the third quarter and grew strongly in the first quarter of 2014, with constant currency growth of 8.2 per cent and growth of 3.2 per cent. Latin America, the BRICs and Next 11 (Bangladesh, Egypt, Indonesia, South Korea, Mexico, Nigeria, Pakistan, Philippines, Vietnam and Turkey), parts of Asia Pacific and the CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) and the MIST showed good growth.

In Asia Pacific, all markets, except Greater China, Malaysia and Japan grew strongly, as the custom parts of the group’s data investment management businesses and media investment management in Mainland China slowed. However, the group’s direct, digital and interactive, public relations and public affairs and branding and identity businesses in Mainland China were up strongly.

Closer look at digital and data sub-sectors
In the first quarter of 2014, over 35 per cent of the Group’s revenues came from direct, digital and interactive, up 1.6 percentage points from the previous year. Digital revenues across the group were up 12 per cent.

On a constant currency basis, data investment management grew 2.8 per cent, with gross margin up by 0.6 per cent, a slower rate of growth than the final quarter of 2013. All regions except North America and Asia Pacific grew in the first quarter, with particularly strong growth in the United Kingdom, Latin America and Africa.

Road ahead
WPP’s preliminary revised forecasts, after the FY 2014 quarter one, are similar to budget, with like-for-like revenue up strongly and gross margin or net sales growth up by over 3 per cent.

For WPP, global concerns remain over the four ‘grey swans’ (known unknowns) that include the fragility of Eurozone, the prospects for the Middle East, a Chinese or BRICs hard or soft landing, with most, if not all suffering a slowdown and dealing with the USD 16 trillion US deficit.

Even as the group identifies two more grey swans for markets like the UK, it believes that these concerns have been heightened by the emergence of two ‘black swans’ — the acceleration of Sino/Japanese tensions over the Diaoyu/Senkaku Islands and the crisis in the Ukraine.

Caution continues
The group concludes that all in all, whilst marketers may be more confident than they were in September 2008, they broadly remain unwilling to take further risks. They remain focussed on a strategy of adding capacity and brand building in both fast growth geographic and functional markets, like digital and containing or reducing capacity, perhaps with brand building to maintain or increase market share, in the mature, slow growth markets. In addition, understandably, but perhaps inadvisedly, they also remain focussed, in a sub-trend pre-Lehman growth environment, on achieving their profitability objectives by cutting costs, rather than by growing the top-line.

Noor Fathima Warsia

A veteran journalist in the Indian marketing, media and advertising fraternity, Noor Fathima Warsia took on the role of Group Editor -– APAC for Digital Market Asia in May 2013. Noor has focussed on tracking trends and developments in the Indian media industry.